Shares in Barclays rose over 40 per cent this morning after it issued an open letter to investors stating it is not seeking capital from private investors or the state as it remains profitable and can absorb a 2008 writedown of £8 billion.
In an unprecedented move after its shares almost halved last week, Barclays repeated a forecast on January 16th that its 2008 pretax profit would be "well ahead" of £5.3 billion ($7.3 billion) and include the impact of £8 billion pounds in gross writedowns, and said it had made a good start to 2009.
Shares in the bank were 43.8 per cent higher at 73.6 pence by 9.24am although that was only enough to take them back to around Thursday's opening price and still left them trading at one tenth of their value in February 2007.
The statement gave a boost to other bank stocks, with Lloyds Banking Group jumping 18 per cent and Royal Bank of Scotland gaining 12 per cent. "There will still be scepticism in the market but it's a very powerful statement," said Ian Gordon, analyst at Exane BNP Paribas.
Marcus Agius, Barclays chairman, said in a statement made available to Reuters: "The bank has taken significant writedowns in a very challenging environment, but record income levels across the business mean it remains profitable and well capitalised. We seek no further capital."
Writing in an open letter to customers and shareholders, Agius and chief executive John Varley said the 2008 profit estimates included all costs, impairment and market valuations.
It included gains stemming from its acquisition of Lehman Brothers' North American business and the sale of its closed life unit but that overall the projected profit reflected "strong operating profit generation".
Analysts said the profit and writedowns were in line with expectations after the January 16th statement, but could reassure some investors who were wary the bank was not being conservative enough with its valuations of assets hit by the credit crisis.
Mr Agius and Mr Varley said the letter aimed to address "the principal causes of concern which we are hearing".
Reuters